This is only concerning the taxation of the release of concessional contributions under the FHSS scheme. Disregard non-concessional contributions and released earnings to make the question more specific.
So, there will be an assessable component of the FHSS release amount, which is counted as assessable income for the withdrawal FY from which a marginal tax rate will be calculated (see 'Taxation of released amount'). The taxed portion of the released amount will be that rate less the 30% offset.
So, assuming you are pulling out a maximum concessional amount of $42,500 (85% of $50,000), I calculate the below scenarios:
- Income of $92,500 + $42,500 = $135,000 | Marginal tax rate of 30% + 2% Medicare means 2% of withdrawal amount is taxed = $950
- Income of $92,501 + $42,500 = $135,001 | Marginal tax rate of 37% + 2% Medicare means 9% of withdrawal amount is taxed = $3,825
The question is whether the above is correct, where one extra dollar of taxable income would mean the tax on the entire withdrawn amount is at the higher tax rate, costing almost $3,000 more in tax.
Or whether the portion of what is released that falls into the lower tax bracket would be taxed at a lower amount.
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